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3 Big Rocks

March 1, 2015

Some of you may already be familiar with the following object lesson, which goes something like this:

  • You have a jar, a pile of sand, small pebbles and 3 big rocks
  • Objective - put all of the sand, pebbles and rocks into the jar

The lesson is quite simple. If you start with the sand and finish with the rocks, you will not be able to fit it all in and you risk the big rocks falling out. You need to start with the big rocks first.

The 3 big rocks represent what we should focus on first and for most families, the 3 big financial planning rocks are:


Three Big Rocks
(1) Living Comfortably throughout your Working Life;

(2) Saving for a Comfortable Retirement ; and

(3) Paying off the Family Home .

This is by no means an exhaustive list, and many have more rocks (e.g. some of the 'pebbles' below) or less rocks (e.g. retiree may only have 1 rock left). When filling your financial planning "jar" these rocks should be the focus and have priority over lesser goals or wants.


Small Pebbles
Children's Education, Family Business, Overseas Holidays, Domestic Holidays, Bequests, Gifts, Donations, New Car, New Furniture, Self Education, Family Support, New Phone, New Computer, Family Activities, etc.

Again, some of these may very well be big rocks and not pebbles and should demand a higher focus in your financial plans. A private school education for your children may be a must or contributing to the family business may be necessary. The important thing here is to understand which goals are necessities (big rocks) and which can be foregone or delayed if necessary.




A Pile of Sand
Finally, after you have put in your rocks and then your pebbles, you can now fill any free space in your jar with sand. These are the luxuries in life, the wants, but not the musts. These may include:

 

Luxury Cars, Art Collections, 5-Star Holidays, First Class Travel, Top End Consumer Goods, and so on.



So what are your big rocks? And have you prioritised them appropriately? Have you put first things first?

Though it would be great to satisfy all our needs and wants, as most of us know, the latter can be a long and never ending list. By focussing your financial planning on your major short-term and long-term goals (your big rocks), you are likely to have more success in securing your financial future and minimising unwanted surprises

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